Compute the net proceeds of private placement

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Reference no: EM1358307

You need to choose between the following types of issues:

• A public issue of $10 million face value of 10-year debt. The interest rate on the debt would be 7.5%, and the debt would be issued at face value. The underwriting spread would be 1.6%, and other expenses would be $75,000.

• A private placement of $10 million face value of 10-year debt. The interest rate on the private placement would be 8.0%, but the total issuing expenses would be only $31,000.

a-1.

Calculate the net proceeds of public issue. (Enter your answer in dollars not in millions.)

2. Calculate the net proceeds of private placement. (Enter your answer in dollars not in millions.)

3.Other things equal, which is the better deal?

Reference no: EM1358307

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